VAT and Sales Tax

To configure income or expense lines that are subject to VAT or Sales Tax, show when the receipts or payments hit the balance sheet, and reflect the accumulation and payment of VAT or sales tax, use the VAT and Sales Tax template. 

For income that is subject to VAT or Sales Tax, the expected monthly amounts are budgeted and affect the Net Gain/Loss line on the Projected Balance Sheet. An annual total is provided. The monthly values also increase an asset account (such as Accounts Receivable) in the month in which they are budgeted, and they are amortized away from that line according to the Amortization Schedule. With the VAT and Sales Tax template, a percentage and frequency are also specified. The percentage is used to calculate the amount of tax (which increases the specified VAT Payable account). The amount accrued to the VAT Payable account is amortized to cash according to the frequency.

For expenses subject to VAT or Sales Tax, the expected monthly amounts are budgeted and affect the Net Gain/Loss line on the Projected Balance Sheet. An annual total is provided. The monthly values also increase a liability account (such as Accounts Payable) in the month in which they are budgeted, and they are amortized away from that line according to the Amortization Schedule. With the VAT and Sales Tax template, a percentage and frequency are also specified. The percentage is used to calculate the amount of tax (which increases the specified VAT Receivable account). The amount accrued to the VAT Receivable account is amortized to cash according to the frequency.

If the frequency is monthly, the tax is amortized in the following month. If the frequency is quarterly, the tax is amortized in the month following the end of the quarter (January, April, July, and October). In this way, tax receivable and payable are accumulated throughout the quarter and amortized in the month in which tax filings are due.

VAT or Sales Tax template